Blog: Sustainable finance and San Francisco

San Francisco became the centre of the universe for green and sustainable investors this week, when it hosted two major conferences. Peter Cripps reports.

Some 1,200 delegates attended the Principles for Responsible Investment's (PRI) annual conference, PRI in Person. It is the biggest responsible investment conference in the world, and its sheer size and the big names it pulls in, such as Paul Polman and Al Gore, is evidence of the fact that the practice of incorporating environmental, social and governance (ESG) factors into investments has now moved from a niche to a mainstream activity.

At the same time, California Governor Jerry Brown held a Global Climate Action Summit, which aims to spur more action to reduce greenhouse gas emissions. This was like a mini-COP. There was a wide variety of speakers represented, such as civil society, business leaders, and politicians.

And it was a colourful affair. Billionaire Michael Bloomberg's excellent speech was interrupted by hecklers chanting that "the earth is not for sale", and a reggae band popped up on stage to usher the audience off to lunch.

The actor and vice chair of Conservation International, Harrison Ford, sporting a shaggy beard, delivered an impassioned speech, his voice cracking with emotion as he warned that if we don't start protecting nature, our climate goals will remain out of reach and "we will be shit-out-of-time".

As you can imagine, both conferences saw countless pledges of action, and overall, it was encouraging to hear so many good intentions. One of the most significant announcements was that the Investor Agenda, which sees investors pledge to take action on four fronts – investments, policy advocacy, disclosure and engagement – has attracted $32 trillion of signatories.

It was refreshing to hear so many policy announcements.

Governor Brown earlier in the week signed a bill setting the state a goal of 100% clean energy by 2045 and he issued an executive order establishing a target to achieve carbon neutrality by the same date.

Denis Naughten, Ireland's minister for communications, climate action and the environment, outlined how his country is banning the sale of fossil fuel-powered cars by 2030 and how its sovereign wealth fund will divest fossil fuels. He also revealed that the government is considering putting a minimum price of €200 on a barrel of oil by 2030 to stop any falls in prices of the commodity undermining the transition to a low-carbon economy.

Such policy announcements are desperately needed in order to reinforce investors' existing actions on climate and encourage them to do more. At the moment, it seems that investors are being asked to seize the initiative on climate change, and pre-empt policies.

A more robust policy framework would help demonstrate that governments are serious about hitting the Paris climate target. Putting a meaningful price on carbon – or even setting a trajectory for carbon prices for coming years – would be the easiest way of sending this signal to investors.

The PRI is also thinking about this dynamic. It has this week published a paper called The Inevitable Policy Response: Act now, which warns governments and investors that if their actions are not sufficient to put the global warming on a low-carbon pathway, then policymakers will respond, and this response will be more severe and disruptive the later it is left.

It goes to show that as well as taking action to lower their exposure to carbon-intensive industries and seeking to back the companies of tomorrow, investors should step up their efforts to lobby policymakers to start putting in place the policies to make sure the Paris climate goal is hit.